A CONSUMER GUIDE TO
AUTO
INSURANCE
A CONSUMER GUIDE TO
AUTO
INSURANCE
INSURANCE ADMINISTRATION
A CONSUMER GUIDE TO AUTO INSURANCE
Maryland Insurance Administration • 800-492-6116 • www.insurance.maryland.gov
TABLE OF CONTENTS
Introduction ....................................................1
How to Shop for Auto Insurance.....................................1
What Factors Impact Rates? ........................................5
What Discounts are Available?.......................................8
Basic Overview of Coverage .......................................10
What Other Coverages are Available? ................................14
Additional or Supplemental Coverage ................................15
Commonly Asked Questions.......................................16
Policy and Coverage Issues .....................................16
Premium Increases, Nonrenewals and Cancellations ..................29
Claims Related Questions ......................................37
How to File a Complaint..........................................44
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Maryland Insurance Administration • 800-492-6116 • www.insurance.maryland.gov
A CONSUMER GUIDE TO AUTO INSURANCE
INTRODUCTION
e Maryland Insurance Administration (MIA) is an independent state agency that
regulates Maryland’s insurance marketplace and protects consumers by ensuring
that insurers and insurance producers (agents and brokers) act in accordance with
insurance laws. We produced this guide to help educate Maryland residents about
auto insurance.
e Insurance Administration is also responsible for investigating and resolving
complaints and questions concerning insurers that do business in Maryland.
HOW TO SHOP FOR
AUTO INSURANCE
Comparison shopping is the key to getting the most for your insurance dollar.
Consumers think nothing of price shopping for televisions, computer tablets
or appliances to save $20 or $30, but forget to shop around for auto insurance
where hundreds of dollars can be saved. ere are more than 150 auto insurers (or
insurance companies) licensed in the state that oer policies, so there are plenty of
places to shop.
The best time to shop for insurance is BEFORE you
purchase a vehicle, trade in a vehicle, add drivers
to your policy or renew your policy.
Here are some basic tips to follow when shopping for insurance:
Before buying a car, determine your insurance costs. is is the rst cost-savings
step in purchasing auto insurance. When you are shopping around for a new or
used car, be sure you factor in the cost of insurance as well. High-performance
vehicles and newer vehicles are generally more expensive to insure.
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A CONSUMER GUIDE TO AUTO INSURANCE
Know what insurance coverage you are buying. Before you begin calling or
shopping on the internet for price quotes, you should familiarize yourself with
the insurance coverage you are buying. It is important to know which coverages
Maryland law requires you to purchase and which coverages are optional.
(Refer to other sections of this publication for more information).
Seek additional information. Many resources oer information about insurance.
In addition to referring to the Maryland Insurance Administration’s auto insurance
rate guide, you may also seek information from consumer groups, consumer
publications and the internet.
Check your Credit Report. Under Maryland law, insurers may not use your credit
history to decide if they will insure you, cancel you, renew you or increase your
premium. However, insurers may use your credit history when you apply for coverage
to determine what rate you will be paying for your auto insurance. Not all insurers
use credit history and you may obtain auto insurance through insurers that do not use
credit. For those insurers that do use credit, they are required to tell you at the time
you apply for the insurance that they will consider your credit history. If you ask, an
insurer must tell you how much of your premium is as a result of your credit score.
Credit reports are used to determine the type of nancial risk you present.
Reviewing your credit report will help inform you of your standing when you
apply for certain credit and certain types of insurance, as well as allow you to
correct any errors you identify. You are entitled to review your credit report at
no charge once every 12 months. For questions or to make corrections to your
credit report, you should contact the Federal Trade Commission, or any of these
credit reporting agencies: TransUnion, Equifax, or Experian. e MIA’s web page,
www.insurance.maryland.gov, under the tab Consumers/Other Resources, has a link
to enable you to access your credit report as well as your loss history report.
For those insurers that use credit history to determine a portion of your premium,
they are required to review your credit history every two years, or you can request
the insurer to do so once during each policy term. e insurer may decrease your
premium if your credit history improves. e insurer cannot use your credit history
to increase your premium at renewal even if your credit deteriorates from what it
was when you applied for your policy.
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A CONSUMER GUIDE TO AUTO INSURANCE
DO COMPARISON SHOPPING
• Contact several insurers or contact an insurance producer*. Insurance
producers have contractual arrangements with insurers to sell insurance
on behalf of the insurers. An insurance producer or insurance agency
may not represent all of the insurers oering coverage in your area, so it
may be worthwhile to contact more than one insurance producer when
comparison shopping. In either instance, your insurance policy is with the
insurer itself and not the insurance producer/insurance agency. Insurers,
insurance producers and insurance agencies are listed in the Yellow Pages
and advertise in newspapers.
* Under Maryland law, individuals and entities that sell, solicit or negotiate
insurance contracts (insurance agents and brokers) are referred to as
“insurance producers.”
• Ask your relatives and friends for recommendations regarding purchasing
auto insurance. In addition, some banks, employers and special interest
groups oer insurance directly to their members.
• e internet also provides a variety of insurance information. Many
insurers have web sites and/or work with non-aliated quoting vendors to
provide insurance premium quotes on-line.
Ask for price quotes. In order to make an apples-to-apples price comparison,
you must provide the same information to each insurer or insurance producer.
e following information is normally requested: make/model/year of the vehicle
you wish to insure, average annual miles driven, your home address, the types of
coverages and limits for those coverages that you wish to purchase and driving
record (accidents or violations) of the vehicle operators. is information is
required to provide you an accurate quote. (Refer to the Maryland Insurance
Administration’s Auto Insurance Comparison Guide to Rates to obtain information
about sample rates.)
Ask about deductibles. A deductible is the amount you agree to be responsible
for in the event of damage to your vehicle (i.e. accident, re or vandalism). If you
select a high deductible, you will pay more money out-of-pocket for any damage;
however, your insurance premium should be lower.
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A CONSUMER GUIDE TO AUTO INSURANCE
Ask for discounts. Again, to help keep the cost down, ask what discounts
the insurer oers. Make sure you provide all information that may result in a
discounted premium (e.g. security devices, safety devices, good driving record, good
student, defensive driving courses, multi-vehicle or multi-policy discounts, etc.).
(See pages 8-9 for additional information.)
Ask about fees. Ask your insurance producer if they charge a fee for making a
premium payment with a credit card. ey are permitted to charge the actual
expenses incurred when a premium payment is made using a credit card, provided
the amount of the fee is disclosed.
Protect yourself from insurance fraud. Once you have selected an insurer, contact the
Maryland Insurance Administration to verify that the insurer is licensed to sell insurance
in Maryland. It is illegal for unlicensed insurers to sell insurance. If you choose to use an
insurance producer, also verify that the insurance producer is licensed.
Financing Insurance. Not everyone can aord to pay their insurance premiums
upfront; therefore, many insurers oer installment plans. In addition, your
premium may be nanced by a premium nance company in exchange for your
agreement to pay interest and service fees.
Whether you choose an installment plan or a premium nance company, ask the
following questions before buying the policy:
• How much is the down payment?
• How much are the monthly payments?
• How many months will payments be made (i.e. six or 12 months)?
• How much is the total payment over the period of the policy?
• Is a premium nance company nancing the payment?
• What is the interest rate on the premium payments (if the payments are
nanced)?
• What other costs or fees are associated with nancing the premium?
• Does the insurer oer an installment plan? Is there an installment charge
or service fee?
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A CONSUMER GUIDE TO AUTO INSURANCE
Other considerations. Price is an important factor in selecting an auto insurer;
however, other factors also deserve consideration. Some consumers prefer to deal with
an insurance producer that has an oce in the same community or with an insurer
that has a claims oce nearby. Customer service is another important consideration.
Also, you may want to know how long the insurer or insurance producer has
been operating in Maryland, how quickly claims are processed and how often
complaints were led against the insurer or insurance producer. Some of this
information may be obtained directly from the insurer or insurance producer. You
may also contact the Maryland Insurance Administration in writing to obtain some
complaint information. Additionally, closed complaint information is available on the
National Association of Insurance Commissioner’s (NAIC) Consumer Information
Source which can be accessed on the NAIC’s website www.naic.org/index_consumer.htm.
WHAT FACTORS
IMPACT RATES?
When you apply for auto insurance, the insurer will ask for information about you
to evaluate your individual risk characteristics. ese individual risk characteristics
assist insurers in predicting the likelihood that you will be in an auto accident in
the future or will le a claim for damages. Insurers evaluate these characteristics to
determine whether their guidelines, known as underwriting guidelines, permit them
to write a policy for you.
If the insurer’s underwriting guidelines permit a policy to be written for you, the insurer
will then determine your premium (cost) based on your individual risk characteristics.
Some risk characteristics that insurers rely on to determine rates include:
Your driving record and claims history. Insurers are generally prohibited from
refusing to issue a policy or increasing your policy premium based on trac accidents,
trac violations or claims that are more than three years old. Insurers may consider
trac accidents, trac violations and claims that are older than three years for
the purpose of determining eligibility for, or the amount of, a premium discount
program. If your driving record or claims history is less than perfect, you may be
considered a higher risk and may not be eligible for a premium discount.
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A CONSUMER GUIDE TO AUTO INSURANCE
Geographic area. e number of claims led by policyholders in your geographic
area aects the rates charged by insurers. Counties or zip codes are commonly used
geographic areas.
Gender and age. Your gender and age will impact your rate. Youthful operators and
older operators will generally pay more for their insurance.
Marital Status. Married individuals generally have a lower incidence of accidents
and claims. erefore, married individuals generally pay lower premiums than
single people. If your spouse passes away, an insurer cannot increase your premiums
solely for that reason.
Prior insurance coverage. Most insurers ask about your insurance history, including
whether or not you currently have coverage or whether or not you have ever been
cancelled or nonrenewed. Some insurers require individuals to pay higher premiums
if there has been any lapse in insurance coverage. However, insurers are prohibited
by law from denying insurance because an applicant was previously insured by the
Maryland Automobile Insurance Fund (MAIF) dba Maryland Auto Insurance.
Annual mileage. Insurers will also calculate your premium based on the average
distance you drive on an annual basis. If your annual mileage is high, then insurers
will consider you a greater risk and will charge you a higher premium.
Age, make and model of vehicle. Premiums are also based on your vehicle’s age,
make, model and value. Certain makes and models of vehicles – when involved in
accidents – generally result in greater levels of bodily injury, sustain greater levels of
damage, or are more dicult and costly to repair. Insurers charge a higher premium
to insure those makes and models.
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A CONSUMER GUIDE TO AUTO INSURANCE
Credit history. Some insurers review an individual’s credit history when
determining that person’s premium. For instance, bankruptcies, late payments, and
the number of credit cards you have may result in a higher premium. Insurers must
follow specic laws when using a consumer’s credit history to underwrite or rate an
auto insurance policy.
ose laws state that an insurer may not:
• increase a renewal premium based on the credit history of the insured;
• apply a surcharge or discount of more than 40% based on credit history; or
• use the following factors to rate a policy: the absence of or inability to
obtain credit history, the number of credit inquiries, or any factor that is
more than 5 years old.
Additionally, you have the right to request that your insurer recheck your credit
history once per policy period. If your credit history has improved, the renewal
premium may be reduced. However, if your credit history has deteriorated, this
information cannot be used to increase your premium.
You can review your credit report(s) when you apply for certain credit and certain
types of insurance, and correct any errors you discover. You can review these reports
at no charge every 12 months. For questions, to make corrections to your credit
report, or to access information about how to obtain free copies of your credit
reports, you should contact the Federal Trade Commission at www.ftc.gov.
Compare the premium you are paying to what another insurer might charge
you. Refer to our Automobile Insurance: A Comparison Guide to Insurance Rates at
www.insurance.maryland.gov or call 800-492-6116 to obtain a copy. Make sure you
compare policies that have the same coverage.
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A CONSUMER GUIDE TO AUTO INSURANCE
WHAT DISCOUNTS
ARE AVAILABLE?
Many insurers oer discounts. You should ask your insurer or insurance producer about
any available discounts before purchasing or renewing your auto insurance policy. Not
all insurers oer the same discounts but some of the most common ones include:
Good driving record. Insurers may consider past trac accidents and trac
violations in determining your eligibility for, or the amount of, a premium
discount. By law, an insurer must oer a discount to an individual who has not had
a moving trac violation with more than one point, or any trac accident in the
prior three years and who has had continuous coverage with that insurer during that
time period. If your driving record is less than perfect, then you may be considered
a higher risk and might pay a higher premium.
Safety devices. Frequently, discounts are oered for devices that limit bodily injury
or property damage caused by accidents. Such devices can include anti-lock brakes,
automatic safety belts, or air bags.
Anti-theft devices. Car alarms and other theft-deterrent devices may also result in a
discount.
Multiple policies. Although an insurer cannot require you to buy a homeowners
insurance policy when you purchase an automobile insurance policy, some insurers
oer discounts to policyholders who purchase both automobile and homeowners
policies. In addition, insurers may oer discounts if you have more than one vehicle
insured with the insurer.
Good student. Many insurers oer discounts to students who maintain at least a B
average.
Driver Education Courses. Many insurers oer discounts for the completion of
driver education and/or driver safety courses.
Renewal Discount. Some insurers oer a discount to policyholders who have
maintained continuous coverage with the insurer for a specied number of years.
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A CONSUMER GUIDE TO AUTO INSURANCE
Driver Monitoring Programs. Some insurers may oer discounts on your auto
insurance premium if you participate in the insurer’s program to monitor operation
of your vehicle. Some programs may require you to install a monitoring device in
your vehicle, while others may require you to agree to use the insurer’s smartphone
based monitoring program. Although your insurer may oer this program, generally
they cannot require you to have one of these devices installed in your vehicle.
Insurers can consider the information collected from the monitoring device in
determining your premium. For example, if the device indicates that you generally
exceed the posted speed limit, the insurer may conclude that your driving habits are
higher risk and may use this information to increase your premium. If your renewal
premium is increased based on the data collected, your insurer must provide a
written explanation of what specically caused the increase.
Memberships or employment discounts. Insurers may oer discounts to
members of certain organizations such as credit unions, shopper’s clubs, or alumni
associations. You also may be eligible to receive a discount through your employer.
Review your deductible. e deductible is the amount you agree to pay in the event
your vehicle is damaged. Raising the deductible on your policy generally will decrease
your premium. If you select a high deductible, you will pay more money out of
pocket for any damage; however, your insurance premium generally will be lower.
Consider whether you want to maintain comprehensive and/or collision
coverage. If your vehicle is older and has been paid o, you may want to consider
dropping these coverages to reduce your premium. However, if you drop these
coverages and your vehicle is damaged in an accident that you cause, or if it is
stolen, vandalized or you collide with an animal, you must pay for the repair.
Options for High-Risk Drivers
If you have speeding tickets, accidents or other violations, some
auto insurers will consider you a high-risk driver and may not sell you
an insurance policy. However, auto insurance coverage is required
under Maryland law. A high-risk driver does have options. Some
insurers and independent insurance producers specialize in
finding coverage for high-risk drivers.
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A CONSUMER GUIDE TO AUTO INSURANCE
Alternatively, Maryland residents who have been turned down for
coverage from at least two private insurers may seek coverage from
the Maryland Automobile Insurance Fund (MAIF) dba Maryland Auto
Insurance. For additional information, please call 800-492-7120, or
visit the MAIF web site at www.mymarylandauto.com.
BASIC OVERVIEW
OF COVERAGE
Auto insurance coverage may include several types of protection. However,
state law requires all registered vehicle owners to purchase certain minimum
protections or coverage levels. Many drivers purchase more than the minimum
requirements to protect themselves from high repair bills, medical expenses and
lawsuits. Consumers who choose to purchase coverage above the state’s minimum
requirements may pay higher premiums.
LIABILITY INSURANCE
Liability insurance protects policyholders when they have caused an accident.
ere are two types of liability coverage that are required by state law: bodily injury
liability coverage and property damage liability coverage.
The minimum amount of liability coverage
required by Maryland Law is:
$30,000 for bodily injury per person
$60,000 bodily injury per accident; and
$15,000 property damage
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A CONSUMER GUIDE TO AUTO INSURANCE
BODILY INJURY LIABILITY INSURANCE
If you cause an accident and an injured person makes a claim or les a lawsuit
against you, bodily injury coverage will:
• Pay for a lawyer to defend you if you are sued; and
• Pay the amount of medical expenses, lost wages and pain and su ering
that you are legally responsible to pay to another person (up to the policy
limits); or,
• Pay an amount to settle these claims (up to the policy limits).
In other words, if the claim for bodily injury is covered by your policy, the insurer
will pay the claim up to the dollar limits of the coverage you purchased; you would
only need to pay if the claim exceeds the policy limit or if the claim was not covered
under the terms of the policy.
PROPERTY DAMAGE LIABILITY INSURANCE:
If you cause an accident that damages someone’s property (such as their car) and
the property owner makes a claim or les a lawsuit against you, property damage
liability coverage will:
• Pay for a lawyer to defend you in the event
that you are sued; and
• Pay the amount of physical damage that you
caused to vehicles or property that you do not
own (up to the policy limits); or,
• Pay an amount to settle these claims (up to
the policy limits).
In other words, if the claim for property damage is covered by your policy, the
insurer will pay the claim up to the dollar limits of the coverage you purchased; you
would only need to pay if the claim exceeds the policy limit or if the claim was not
covered under the terms of the policy.
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A CONSUMER GUIDE TO AUTO INSURANCE
Other people, such as family members or others operating your vehicle, may also be
covered under your insurance policy’s bodily injury or property damage coverage.
Family members are generally covered if: they are listed on the policy as drivers,
they are driving your car with your consent, and they are not otherwise excluded by
your policy’s terms. If you are unsure whether a potential driver would be covered
under your policy, read the terms of your policy or call your insurer or insurance
producer before you let that person drive the car.
Note: While state law establishes the minimum level of liability coverage, consumers
may choose to purchase more coverage. Higher limits of coverage provide more
protection against repair expenses, medical expenses and legal judgments – all of
which might be higher than the minimum coverages required by Maryland law.
Higher limits can also provide a higher level of protection for your assets in the event
you cause an accident that results in signicant injuries or damages.
UNINSURED MOTORIST (UM) COVERAGE
Uninsured motorist coverage will protect you if someone driving without insurance
causes damage to your property or injures you or your passenger(s). Coverage also
applies when an automobile damages your vehicle or injures you and leaves the scene
of the accident without being identied. is type of coverage includes damage to
your property, as well as the loss of the use of the insured vehicle (e.g. reasonable
rental car expenses), medical expenses, lost wages, and pain and suering.
The minimum amount of uninsured motorist coverage
required by Maryland law is:
$30,000 for bodily injury per person;
$60,000 bodily injury per accident; and
$15,000 property damage.
In Maryland, UM coverage also includes underinsured motorist coverage, which is
known as UIM coverage. It provides you with bodily injury and property damage
protection in the event you are involved in an accident where the at-fault driver has an
insurance policy with liability limits that are less than your UM limits, and your injuries
exceed the at-fault driver’s available limits. You then can claim the dierence under your
own insurance policy.
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A CONSUMER GUIDE TO AUTO INSURANCE
Insurers also oer Enhanced Underinsured Motorist Coverage. Talk to your insurer or
insurance producer to nd out what is included in this coverage.
PERSONAL INJURY PROTECTION (PIP)
Up to the specied dollar amount of your coverage, PIP coverage will reimburse
you (or others named on your policy) for reasonable and necessary medical
expenses resulting from an auto accident, as well as lost wages. is reimbursement
will be made regardless of who caused the accident.
PIP coverage can be denied if claims are not properly and timely led with your
insurer. erefore, it is important to contact your insurer or insurance producer
immediately after an accident has occurred and request PIP forms.
Maryland law requires insurers to offer their policyholders at least
$2,500 in Personal Injury Protection (PIP) coverage.
You may elect to purchase limited PIP coverage and certain individuals
may be able to fully reject PIP coverage. Consult your insurance
producer or insurer for a thorough explanation of all of your options.
Because PIP coverage may duplicate an individual’s health care coverage, some
consumers choose to waive PIP if they feel they have adequate health care coverage
and/or can aord to pay for medical treatment. You should check your health care
policy and consult your insurer or insurance producer about this coverage. Although
waiving PIP results in a lower premium, you should keep in mind that PIP also pays lost
wages and your household members’ medical expenses, which are not covered under
health care policies, up to the limit, which is typically $2,500. Your insurer may oer
higher PIP limits at an increased cost.
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A CONSUMER GUIDE TO AUTO INSURANCE
WHAT OTHER
COVERAGES ARE
AVAILABLE?
Physical Damage Coverage, also referred to as comprehensive and collision
coverage, is the most commonly recognized coverage as it protects you from
expenses related to damage or loss of your vehicle (e.g. accidents that you cause,
theft or vandalism).
Although Maryland law does not require you to purchase physical damage coverage,
often banks and other nancial institutions that lend you money to purchase your
vehicle or lease you a vehicle will require that you purchase both collision and
comprehensive coverage to protect their interests in the vehicle.
Collision Coverage pays to repair your vehicle or pays you what your vehicle was
worth right before an accident occurred. (If your insurer determines the vehicle is
a total loss, this means that the cost to repair the vehicle exceeds, or is expected to
exceed, 75% of the value of the vehicle). Collision coverage is provided regardless of
who caused the accident.
Because collision coverage is usually the most expensive component of your auto
insurance premium, many people may choose to purchase collision coverage with a
high deductible.
Generally, your premium decreases as the amount of the deductible increases.
For example, if you hit a pole and the resulting damage to your vehicle is $1,200
and your deductible is $500, then the insurer will pay $700 and you will pay the
balance of $500. On the other hand, if you purchased collision coverage with a
lower deductible or no deductible, then you would pay less towards the repair costs,
but you would pay a higher premium.
Comprehensive Coverage (also known as Other an Collision) pays for damage to
your car resulting from causes other than an accident, such as vandalism or theft. As
with collision coverage, choosing a higher deductible may lower your insurance cost.
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A CONSUMER GUIDE TO AUTO INSURANCE
ADDITIONAL OR
SUPPLEMENTAL
COVERAGE
Additional coverages are available that can supplement your insurance policy.
Medical Payments Coverage pays for medical expenses and related costs for you
or others injured or killed while riding in your vehicle. ese claims may include
rehabilitative, surgical, chiropractic, x-ray, dental, prosthetic, professional nursing and
funeral expenses. In addition, this coverage will typically cover you or members of
your family if hit by a vehicle while walking or riding in another vehicle.
Most policies require that the amount you purchased under your PIP coverage be
used in full before payments will be made under medical payments coverage.
Medical payments coverage is di erent from PIP
coverage in that medical payments coverage will only
pay medical expenses. If you have health care coverage,
you should consult your policy to determine whether
you are duplicating coverage. Please see page 13 for
further explanation of PIP coverage.
Rental Reimbursement Coverage pays for all or
a portion of the cost of a rental vehicle while your
vehicle is being repaired after an accident or a loss speci cally protected under
your comprehensive coverage. e coverage typically pays a speci c daily rate for a
speci ed number of days.
Transportation Expense Coverage covers additional transportation costs – such as
car rental, bus fare, etc. – while your vehicle is being repaired after an accident or a
loss covered under your comprehensive coverage.
Towing and Labor Coverage pays to tow your vehicle to a repair shop after an
accident or a breakdown. Members of auto clubs, such as AAA, may already have
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A CONSUMER GUIDE TO AUTO INSURANCE
similar coverage. Some insurers may use your claims history under this coverage in
determining your policy premium. You may want to take this into account when
choosing between purchasing the coverage from your automobile insurer, a motor
club, like AAA, or another source.
Mechanical Breakdown Coverage pays to repair your vehicle after a mechanical
breakdown (e.g. engine failure). Some insurers oer this coverage either as a policy
endorsement or as a separate policy.
COMMONLY ASKED
QUESTIONS
POLICY AND COVERAGE ISSUES
What types of coverages are provided when I purchase an auto insurance
policy? Can I purchase other coverages as well?
An auto insurance policy must contain certain “mandatory” coverages, and may
contain other optional coverages that you may choose to purchase. Below is a
description of various types of mandatory and optional coverages. You are required
to purchase no less than the statutory minimum amount for the mandatory
coverages. However, you may choose to purchase more than the statutorily required
limits of one or all of the mandatory coverages. ere is no statutory minimum for
optional coverages. You may wish to contact your insurer or insurance producer for
assistance in determining the appropriate amount of insurance for you.
• Bodily Injury Liability Coverage (Mandatory): Bodily injury liability
insurance provides coverage for medical expenses, loss of wages and pain
and suering that you may be legally responsible to pay to a person you
have injured. is coverage may be applicable to passengers in your vehicle,
persons in another vehicle or pedestrians. e policy provides separate
limits of coverage for each person injured and a cap on coverage for each
accident. Maryland law requires minimum coverage in the amount of
$30,000 per person and $60,000 per accident.
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A CONSUMER GUIDE TO AUTO INSURANCE
• Property Damage Liability Coverage (Mandatory): Property damage
liability insurance provides coverage for physical damage that you have
caused to vehicles or property that you do not own. Maryland law requires
minimum coverage for property damage liability in the amount of
$15,000.
• Personal Injury Protection (PIP) Coverage (Mandatory Oer/
You May Waive): Personal Injury Protection (PIP) insurance provides
reimbursement for some types of lost income and medical expenses for
injuries sustained as a result of an accident, regardless of fault. Maryland
law requires minimum coverage of $2,500. If you choose to purchase
PIP coverage for all insured drivers and residents of the household above
16 years of age, this is known as “Full PIP.” You may, however, elect not
to purchase a portion of Full PIP. When you decline to purchase PIP for
any listed driver and family members of your household (over 16 years
of age), this is known as “Limited PIP”. Some policyholders who have
health insurance coverage may choose to waive PIP or to purchase limited
PIP coverage in order to reduce the premium on the policy. Please note,
however, that PIP is designed to ensure that medical expenses are paid
promptly to limit the economic harm you may suer due to injuries from
an auto accident. Many policyholders pay the extra expense associated with
PIP in order to have coverage for lost wages. Others purchase PIP so that
they have a second source of recovery when being treated for accident-
related injuries. Remember that your PIP benets typically provide only
$2,500 of coverage. If you meet certain conditions, MAIF and some other
insurers may permit you to reject all PIP coverage. Ask your insurer or
insurance producer to learn more.
• Comprehensive Coverage (Optional): Maryland law does not require
that you purchase comprehensive coverage. However, if you take out a
loan to purchase your vehicle, most lenders will require that you purchase
comprehensive coverage. e same is true if you have leased a vehicle;
the lessor may require you to purchase comprehensive coverage for the
vehicle. Comprehensive insurance provides coverage for property damage
to your insured vehicle resulting from occurrences other than collision,
and is sometimes referred to as coverage for “acts of God.” Comprehensive
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insurance typically provides coverage for ood, theft, vandalism, glass
breakage not resulting from an accident, and accidents in which the driver
strikes an animal.
• Collision Coverage (Optional): Maryland law does not require that you
purchase collision coverage. However, if you take out a loan to purchase
your vehicle, most lenders will require that you purchase collision coverage.
Collision insurance provides coverage for property damage to your insured
vehicle in the event of a collision or in the event the vehicle ips over.
• Uninsured/Underinsured Motorist Bodily Injury Liability
(Mandatory): Uninsured/underinsured motorist bodily injury liability
insurance provides coverage for medical expenses, lost wages and pain
and suering caused by a vehicle that does not have insurance or that has
insurance that is insucient to cover damages. Maryland law requires
that you purchase uninsured/underinsured motorist bodily injury liability
insurance that covers at least $30,000 in damages per person injured, with
a cap of $60,000 per accident. You may choose to purchase coverage in
amounts larger than this statutory minimum.
• Uninsured Motorist Property Damage Liability (Mandatory): Uninsured
motorist property damage liability insurance provides coverage for property
damage to your vehicle and other property that is caused by a vehicle that
does not have insurance. Coverage also applies when an automobile damages
your vehicle or injures you and leaves the scene of the accident without being
identied. Please check your insurance policy as there is usually a provision
that requires you to notify the police and report the accident to the insurer
within 24 to 48 hours after its occurrence. Maryland law requires that you
purchase uninsured motorist property damage insurance that provides at
least $15,000 in coverage. You may choose to purchase coverage in amounts
larger than this statutory minimum.
• Medical Payments Coverage (Optional): Medical payments insurance
provides coverage for medical expenses arising out of an auto accident,
regardless of fault. is coverage is available after any PIP coverage is exhausted.
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• Towing and Labor (Optional): Towing and labor insurance provides
coverage for towing and labor expenses arising out of a breakdown of an
insured vehicle. Some insurers use your claims history under this coverage
when determining the applicable premium. You may want to take this
into account when choosing between purchasing the coverage from your
automobile insurer, a motor club, like AAA, or another source.
• Rental Reimbursement (Optional): Rental reimbursement insurance
provides coverage for your costs in renting a vehicle that is needed to act
as a substitute for the insured vehicle damaged in an accident. Coverage is
usually provided on a xed rate basis per day, regardless of the actual daily
cost of the rental, up to a maximum amount of days (usually not to exceed
30 days).
How do insurers develop the premium that I am charged?
Insurers consider a wide variety of criteria in developing their premiums. Each of
the criteria assists the insurer in predicting the likelihood that you will be in an
accident or otherwise incur damages resulting in ling a claim. e criteria that
insurers consider commonly include age, gender, marital status, number of miles
driven annually, driving record, credit history, whether the insured vehicle is used
for business, pleasure or both, the type of vehicle insured, and the location where
the vehicle is principally garaged. Since each insurer balances these rating factors
dierently, the rate quoted by one insurer may dier dramatically from the rates
quoted by other insurers. e amount of your premium will also depend upon the
coverages you purchase, the amounts or limits for the coverages that you purchase,
the type of vehicle(s) you insure and the deductibles you choose for the coverages.
When shopping for an auto insurance policy, it is important to compare quoted
premiums, policy limits, coverages and deductibles in order to determine which
insurer provides the best value for your insurance dollars. ere are many options
available and questions to be answered with respect to the dierences between
quotes. Your insurer or insurance producer should be able to assist you and answer
all of your questions.
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What can I do to reduce my auto insurance premium?
e rst step to reducing your auto insurance premium is to determine the type
and amount of each coverage that you have and the amount that you are paying
for each coverage. You can then make a judgment as to whether it is appropriate
(or even possible) to obtain those same coverages from another insurer at a lower
cost and/or whether it is appropriate to reduce the type or amount of one or more
coverages in order to reduce cost. Your insurer or insurance producer may be able to
assist you in making this assessment.
e MIA has prepared an Auto Insurance Comparison Guide to Rates to assist
consumers in comparing the rates of dierent insurers. is guide is updated
biannually and is available on our website at www.insurance.maryland.gov under
Consumers/Publications. You may also contact the MIA at 410-468-2000 or 800-
492-6116 (toll free) to request a free copy.
If you think that a reduction in the amount of your coverage might be appropriate,
you may want to consider the following options. If you currently have full Personal
Injury Protection (PIP) coverage and also have health insurance, you may want
to give some consideration to whether the duplication of coverage is worth the
additional premium you are paying. If you currently have physical damage coverage
(comprehensive and collision), you may want to give some consideration to
discontinuing the coverage (see the more detailed discussion below, in response
to the next Commonly Asked Question). You should also review your uninsured
motorists (UM) coverage limits. Do they equal your liability limits? Before making
any decisions to reduce coverages or the amounts of coverages, however, you should
make a determination as to whether the reduction in coverage that is provided to
you under the policy is justied by the amount you will save in reduced premium.
You may also want to give some consideration to whether increasing the amount
of your deductibles would be benecial for you. For example, if you raise the
deductible on your collision insurance from $100 to $500, the amount of your
premium should decrease. You must then weigh the benet of the reduction in
premium against the fact that you will have to pay $500, instead of $100, in the
event that you are in an accident and make a claim under your collision coverage.
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Once you have reviewed the various coverage options, you should discuss with
your insurer or insurance producer whether there are any discounts that might
be available to you. Many insurers o er, for example, good driver discounts (for
drivers without any violations or accidents for a pre-determined period of time
while insured by the insurer); multi-policy discounts (if you have more than one
policy with the insurer, i.e., homeowners and auto); multi-vehicle discounts (when
you insure more than one vehicle with the insurer); protective device discounts
(anti-theft, antilock brakes, air bags); discounts depending on the make and model
of your vehicle; a nity group discounts (if, for example, you are a member of an
alumni group, buying club or other organization); and longevity discounts (for
those insured by an insurer for a certain period of time).
You may also want to ask your insurer or insurance producer to explain your
premium payment options. You may be able to reduce your total insurance costs
by changing to a di erent payment method. For example, if your premium is being
nanced through a premium nance company, you are paying fees and interest
charges on top of your premium. Check to see if your insurer o ers installment
plans that allow you to make payments monthly, bi-monthly, or quarterly for a
nominal fee and no interest. Also, check to see whether the insurer o ers a discount
if you pay the entire annual or semi-annual premium up front.
My car is several years old and has been paid o .
Should I maintain comprehensive and collision
coverage?
e answer can depend on whether you can a ord to
repair or replace your vehicle if it is damaged in an
accident that you caused (collision coverage), or if it
is stolen, vandalized, damaged by a weather event, or
you hit an animal (comprehensive coverage). While
you are required by law to have property damage
liability coverage that covers physical damage to the property of others if you are
at fault, the law does not require you to have coverage for physical damage to your
own property.
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You should compare the cost of having these coverages against the value of your
vehicle. If the cost of having the insurance coverage exceeds the value of your
vehicle, it may not be worth purchasing these types of coverages.
You can determine the costs of these coverages by asking your insurer or insurance
producer to tell you what these speci c coverages cost. You can determine the
value of your vehicle by referring to similar vehicles
that may be listed for sale in the newspaper or on
the internet. You may also choose to nd pricing
information by using one of the resale price guides,
such as Kelly Blue Book or the NADA Used Car
Guide.
1
Should you decide the cost of comprehensive and
collision coverage is not worth the protection you
would receive, and you decide to remove these
coverages from your auto insurance policy, your premium will be decreased.
You can also decrease the amount of your premium by raising the amount of
your deductible, which is the amount you pay before the insurer will pay for any
damages you may have sustained.
May an insurer consider my credit history when reviewing my application for
auto insurance?
Maryland law states that an insurer may not refuse to underwrite (that is to insure),
refuse to renew, cancel or increase the renewal premium based, in whole or in part,
on the credit history of the insured or applicant. However, an insurer may use credit
history to rate a new policy. is means that the decision to place you with an
a liated insurer, assign you to a speci c tier within an insurer, or to add or remove
a discount based on your credit score when you rst obtain insurance with the
insurer is authorized by law.
1 Reference to these guides is not meant as an endorsement by the Maryland Insurance Administration.
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May an insurer consider my credit history when establishing the premium for
my auto insurance policy?
Yes. When a person initially applies for an auto insurance policy, the insurer may
consider an applicant’s credit history when determining the premium to be charged.
If the insurer considers your credit history, it can only rely upon credit factors that
occurred within the previous ve years.
Additionally, the insurer/insurance producer must advise you, at the time of your
application, that your credit history is being considered and, if you request it, must
provide you with a quote that separately identies the portion of the premium that
is aected by your credit history.
Once the policy is eective, your premium cannot be increased if your credit score
worsens. However, if your credit score improves, that may help lower your premium
at renewal. Insurers that use credit are required to obtain new credit scores every
two years and you will automatically receive the benet of an improved credit score
if the new report shows an improvement that qualies for a better price under the
insurer’s led rating program. However, if you believe your score improved, you
may request the insurer to check it even if the two year period has not passed. You
are entitled to request the insurer to check your credit score once during any policy
period.
What happens if there is a lapse in my coverage? Will I have to pay a penalty?
Maryland law requires all owners of motor vehicles to purchase and maintain the
minimum coverage for bodily injury liability, Personal Injury Protection (PIP),
property damage, and uninsured/underinsured motorist protection. State law
requires you to have a minimum of $30,000 per person and $60,000 per accident
in bodily injury liability coverage, $15,000 in property liability coverage, and
identical amounts of uninsured/underinsured motorist bodily injury coverage, as
well as $15,000 in uninsured motorist property damage coverage and $2,500 in
Personal Injury Protection coverage.
By law, when an automobile insurance policy is cancelled or nonrenewed, the
insurer is required to notify the MVA. If, based on the information they have on
record, it appears to the MVA that you do not have insurance coverage, the MVA
may contact you and request that you provide a Maryland Insurance Certication
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Form (FR-19) that shows adequate coverage has been in place since the vehicle was
registered. Insurers are required to provide FR-19 forms free-of-charge, without
question, to all policyholders. If coverage cannot be veried through an insurer,
the MVA will assess the vehicle owner a penalty fee for each day the vehicle was
uninsured. Uninsured vehicle owners could:
• lose license plates and vehicle registration privileges;
• pay uninsured motorist penalty fees for each lapse of insurance - $200 for
the first 30 days, $7 for each day thereafter;
• pay a restoration fee of up to $25 for a vehicle’s registration;
• be prohibited from registering any future vehicles until all insurance
violations are cleared;
• be prohibited from renewing a suspended registration until all insurance
violations are cleared;
• have license plates confiscated by an authorized tag recovery agent once a
registration suspension is in effect; or
• pay a fine of up to $1,000 and/or one year imprisonment for providing
false evidence of insurance.
If you wish to challenge the ne, you must contact the MVA at 410-768-7000. e
MVA also may impose other penalties, such as revoking license plate and vehicle
registration privileges. You also may have to pay a fee to reinstate your vehicle
registration.
If your vehicle is uninsured for any period of time, you also may nd that your
insurance premium is higher after the lapse. Additionally, you may nd that some
insurers will not insure you or your vehicle if there has been a lapse in coverage
while you owned it. Insurers sometimes do this because they have found that those
who drive without insurance present a greater risk for future losses than those
drivers who maintain continuous insurance coverage.
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Is there a dierence between the “Point System” used by the Maryland Motor
Vehicle Administration (MVA) and the “Point System” used by an insurer?
Yes. e MVA tracks points assigned to your driving record for any violations of
motor vehicle laws (e.g. tickets or accidents). e law sets out the number of points
that may be assigned for any violation of the motor vehicle law. is point system
is used to determine if you are eligible for a Maryland driver’s license or if it will be
restricted in any manner.
On the other hand, insurers assign points based on the insurer’s individual
underwriting (or pricing) guidelines or in accordance with its rating plan led with
the Maryland Insurance Administration. e guidelines or rating plans are not
necessarily consistent with the MVA’s point system and are not established by law.
Rather, insurers assign points to a driver’s rating category for moving violations,
accidents and claims. e total points for all drivers in a particular rating category
will determine whether the insurer will insure you, will renew your insurance and
what the amount of your policy premium will be, including any rate increases or
surcharges that may be added due to your driving violations or claims history.
Additionally, while the MVA maintains points on your driving record for a period
of two (2) years, your insurer may use three (3) years of history, or longer for
discount purposes.
My child is attending college and is living away from home. Why should I keep
him/her on the policy?
A personal auto insurance policy provides coverage for the named insured, all listed
drivers and all resident relatives in the household. Although your child is away at
school, he or she may still be considered a resident of your household, and as such,
still presents an exposure or risk to the insurer.
For example, when the child returns home for visits, school breaks, etc., he or she
will, more than likely, have access to the family vehicles and will drive them. As a
result, some insurers may continue to charge and collect premiums as if the child
is still in the home. However, other insurers may take this into consideration and
adjust the rate accordingly. erefore, you should contact your insurer or insurance
producer and ask what the insurer’s rating rules provide with respect to a child away
at college.
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My daughter or son is going to be driving soon. When should I notify my
insurer?
Insurers determine premiums based upon the exposure or risk presented by the
applicants and/or insureds. Youthful operators will cause the premiums to increase
because a youthful operator does not have much experience operating a motor
vehicle and is, statistically, more likely to be involved in an accident.
Some insurers require that policyholders add youthful operators as soon as they
obtain their learner’s permits or provisional licenses, while others require their
addition to the policy upon receipt of their driver’s licenses. As a result, you should
contact your insurer or insurance producer before your child obtains a learner’s
permit to nd out what the insurer’s policy, guidelines or rating plan requires and
how this will aect your premium.
Some insurers also oer a “rst accident forgiveness” program which means that, for
an additional cost, the premium will not be raised after a qualifying accident. Terms
and conditions of such programs vary from one insurer to the next, so ask your
insurer or insurance producer for more details.
What is GAP insurance and should I purchase it?
Today’s automobiles are expensive and most consumers nance the purchase of a
motor vehicle. However, the value of a motor vehicle will start to decline as soon as
you drive it o the lot. As a result, many new and used car buyers nd themselves
“upside down,” owing more for the vehicle than the vehicle’s actual cash value at
the time of a loss. It can be devastating if your vehicle is stolen and not recovered
or is totaled in an accident and the actual cash value is less than the balance owed
on the loan. e insurer paying for the loss is only required to pay you the actual
cash value of the damaged vehicle at the time of the loss. us, you could be left
in a situation where your vehicle is determined to be a total loss, but once you
have been paid the value of the vehicle, you still owe a balance on your motor
vehicle loan. GAP insurance is an optional coverage that you can purchase from
some insurers to protect you in the event your vehicle is totaled and the actual cash
value of the vehicle is less than the amount owed on the vehicle. Some insurers
oer a replacement cost endorsement that would provide you with a new vehicle
as a replacement for the damaged vehicle. GAP protection provides you with a
policy that will pay the dierence between the actual cash value of the vehicle
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paid pursuant to the auto insurance policy and the amount outstanding on the
loan. is means that at the end of the claims process, you are not left with an
outstanding balance due for a vehicle that no longer exists. However, you will still
be without a vehicle. You may also be able to purchase a similar product, called
a debt-cancellation agreement, from the dealership when you purchase or lease a
vehicle. Debt-cancellation agreements are not insurance and are not regulated by
the Maryland Insurance Administration. Consumers with complaints concerning
a debt-cancellation agreement should contact the O ce of the Attorney General’s
Consumer Protection Division.
Can my automobile insurer require me to insure my home with them?
No. Maryland law prohibits an automobile insurer from denying, refusing to renew,
or canceling a policy solely because the consumer does not have a homeowners
or renters insurance policy with the same insurer.
Insurers are permitted to o er discounts to consumers
that choose to have their homeowners or renters
policy with their automobile insurer.
I am thinking about becoming an Uber driver. Will
my automobile policy cover me and my passengers
if I am in an accident?
“Ridesharing” is the term used to describe when, for
a fee, a person drives someone in their automobile.
e rides are arranged through an on-line application which is created by a
Transportation Network Company (TNC). Currently the major TNCs are Lyft,
Sidecar and Uber.
Most automobile policies do not provide coverage when a driver accepts payment
to drive others (this is di erent than carpooling). Maryland law permits insurance
policies to exclude all coverage for injuries and damages that occur when you
are driving for a TNC such as Lyft, Sidecar and Uber. Typically, you will need to
purchase a commercial policy in order to have the appropriate coverage. If you do
not have coverage, you may be personally responsible for payment of medical
expenses and other damages for anyone injured and any automobiles that are
damaged in an accident that is your fault. Additionally, if an accident occurs
when you are driving passengers for a TNC, Maryland law allows police o cers and
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the other people involved in the accident to request proof of valid insurance that
provides coverage for TNC driving services.
Some TNCs oer limited coverage for drivers providing services for those TNCs.
However, this coverage is subject to certain limitations and may not cover every
situation.
If you are considering becoming a TNC driver, you should do the following:
1. Ask your insurer if your current policy provides coverage, and if not,
whether your insurer sells that coverage;
2. If you are making payments on your automobile, check with your lender or
lessor to see if they permit you to drive for a TNC under your loan or lease
agreement;
3. Before you sign the TNC agreement, review it carefully to nd out whether
the TNC will be providing insurance, what it covers, and whether the
coverage diers based on when the accident occurs (for example, when
you have a passenger in the vehicle versus when you are going to pick up a
passenger). Also, make sure you know what the deductible is and what the
coverage limit is.
Before you enter into a TNC agreement, it is essential that you understand your
exposure.
If you have any questions about the requirements to become a TNC driver,
contact the Public Service Commission at (800) 492-0474 or visit their website at
www.psc.state.md.us.
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PREMIUM INCREASES, NONRENEWALS
AND CANCELLATIONS
I have not had a ticket or an accident, nor have I led a claim. Why has my
premium increased?
Insurers consider a wide variety of criteria in developing their premiums. Each of
the criteria assists the insurer in predicting the likelihood that you will be in an
accident or otherwise incur damages resulting in the ling of a claim. e criteria
that insurers consider commonly include age, gender, marital status, number of
miles driven annually, driving record, credit history, whether the insured vehicle
is used for business, pleasure or both, the type of vehicle insured, and the location
where the vehicle is principally garaged. ese criteria are also referred to as rating
or risk factors. People who have similar characteristics are placed in the same group
and charged the same premium. Your insurer will send you a Statement of Rate
Classications at each policy renewal that describes the reasons your premium may
go up.
While many insurers have defensive driver plans, also known as surcharge plans,
that make policyholders who receive tickets or are involved in accidents pay an
additional premium, often the surcharges may not be enough to cover the insurer’s
losses. Sometimes, based upon the experience of the group, the premiums collected
may not be sucient to support the projected costs of the claims. When this
occurs, an insurer may le with the Maryland Insurance Administration a plan
to implement a general rate increase. e insurer may only charge the premiums
reected in their current rate lings at the time the policy is issued or renewed.
In general, the more stringent the insurer’s underwriting criteria (no losses,
or one loss within three years, no tickets, etc.), the lower the premium for the
policyholders as the insurer is limiting its exposure to losses.
My insurer sent a notice increasing my premium due to my son’s accident and
oered the option to exclude him. What does this mean?
When an insurer proposes to increase your auto insurance policy premium,
Maryland law requires the insurer to send you a notice at least 45 days in advance
of the date the new premium is eective. If the premium increase is based on the
driving record of one or more, but less than all of the drivers insured under the
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policy, the notice must provide you with the option to exclude the driver whose
record is causing the increase from the coverage of the policy. us, you have at
least three options:
1. Accept the renewal oer and pay the increased premium;
2. File a protest of the increase with the MIA; or,
3. Exclude the driver causing the premium to increase.
e rst option is self-explanatory.
e second option, a protest of the increase, will only result in the insurer’s action
being overturned (and the premium increase being disallowed) if the insurer
has violated Maryland insurance law. If, however, the insurer acted properly in
implementing the increase and provided the proper notice, the MIA will uphold the
insurer’s action and permit the insurer to collect the premium increase.
e third option is for the insured to decide to exclude the driver with the
poor driving history from the coverage of the policy. If you exclude this driver,
the insurer cannot increase your premium based on the driving history of the
excluded driver. It is important to understand, however, that an excluded driver
cannot legally operate the insured vehicle(s) unless he obtains a separate policy of
auto insurance. If the excluded driver should operate any vehicle covered by the
insurance policy and is involved in an accident, there will be no coverage of any
kind available under your policy for the damage the excluded driver has caused,
either to another person and their property or to your own vehicle.
What is the dierence between a nonrenewal and a cancellation?
Insurance policies are issued for a specic period of time or “term”. Insurers will
issue a policy for a period of either 6 or 12 months. A nonrenewal occurs when an
insurer decides not to renew your insurance coverage at the end of the policy’s term.
A cancellation occurs when an insurer decides to stop your coverage during the
eective period of the policy or before the policy term ends.
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An insurer may nonrenew your policy under the following conditions:
1. If you committed fraud or misrepresented your driving record or other
material fact(s) when applying for your insurance or while making a claim.
2. If, within the past three years, you:
• led three or more claims where you were not responsible or “not at
fault” (e.g. theft, windshield damage, or a Personal Injury Protection
claim);
• led two or more claims for accidents that you caused or that you were
considered to be “at fault”;
• led any combination of three or more “at-fault” accident claims or
moving violations;
• were convicted of operating a motor vehicle while under the inuence of
alcohol, impaired or intoxicated, or while under the inuence of drugs or
controlled dangerous substance or any combination of drugs and alcohol
that impair your ability to operate a motor vehicle;
• were convicted of homicide, assault, reckless endangerment or criminal
negligence arising out of the operation of your vehicle;
• were convicted of using a motor vehicle to participate in a felony act; or
• violated or exceeded the insurer’s underwriting guidelines.
NOTE: Depending upon the insurer’s underwriting guidelines or rating rules, a
“conviction” may include a plea of no contest or a probation before judgment.
3. If, within the past two years, you:
• have had your license or registration revoked or suspended for a reason
related to the driving record of the operator; or
• have had three or more moving violations.
An insurer may cancel a policy mid-term under the following conditions:
• if you commit fraud or misrepresent your driving record or other material
facts when applying for your insurance or while making a claim;
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• if there exists a matter or issue related to the risk that constitutes a threat to
public safety;
• if there is a change in the condition of the risk that results in an increase in
the hazard insured against;
• if you fail to pay your premium when due; or
• if the driver’s license or motor vehicle registration of the named insured
or any covered driver under the policy is suspended or revoked for reasons
related to the driving record of the named insured or any covered driver.
My spouse recently passed away. Can my insurer increase my premium?
An insurer cannot increase your premium if the only reason is that your spouse
passed away.
Can an insurer transfer my automobile policy to a dierent insurer at renewal?
An insurer may transfer your policy to an aliate (owned by the same parent
company) as long as: (1) the aliated company is admitted as an insurer in
Maryland; (2) your premium does not increase; and (3) there is no reduction in
coverage under the policy as a result of the transfer. e policy issued by the new
insurer will still be considered a renewal of the expiring policy. e insurer must
send a notice of your renewal policy premium at least 45 days in advance, and that
notice must contain a disclosure of the transfer to the new insurer.
Can my insurer nonrenew my policy because of accidents that were not my
fault?
Yes. An insurer may cancel or nonrenew a policy if you have led three or more
“not-at-fault” claims within a three-year period of time. Comprehensive and
uninsured/underinsured motorist coverages are considered “not-at-fault” coverages.
Comprehensive claims include theft, vandalism or striking of an animal. Even
though you may not have been at fault for these claims, there are costs for an insurer
associated with these claims which is why state law allows them to be used to cancel or
nonrenew a policy if there are three or more within a three year time period.
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May my insurer lawfully nonrenew my policy for accidents and violations?
Yes, but only under the following conditions:
1. If you committed fraud or misrepresented your driving record or other
material fact(s) when applying for your insurance or while making a claim.
2. If, within the past three years, you:
• led three or more claims where you were not responsible or “not at
fault” (e.g. theft, windshield damage or a Personal Injury Protection
claim);
• led two or more claims for accidents that you caused or that you were
considered to be “at fault”;
• led any combination of three or more “at-fault” accident claims or
moving violations;
• were convicted of operating a motor vehicle while under the inuence of
alcohol, impaired or intoxicated, or while under the inuence of drugs or
controlled dangerous substance or any combination of drugs and alcohol
that impair your ability to operate a motor vehicle;
• were convicted of homicide, assault, reckless endangerment or criminal
negligence arising out of the operation of your vehicle;
• were convicted of using a motor vehicle to participate in a felony act; or
• violated or exceeded the insurer’s underwriting guidelines.
3. If, within the past two years, you:
• have had your license or registration revoked or suspended for a reason
related to the driving record of the operator; or
• have had three or more moving violations.
NOTE: Depending upon the insurer’s underwriting guidelines or rating
rules, a “conviction” may include a plea of no contest or a probation before
judgment.
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Can my insurer increase my premium because it paid a claim under the
Personal Injury Protection (PIP) coverage of my policy?
No. Maryland law prohibits an insurer from increasing your premium (including
surcharging, reclassifying, or removing a discount) as a result of a claim or payment
made under PIP coverage.
When can an insurer cancel my policy?
An insurer may cancel a policy mid-term under the following conditions:
• If you commit fraud or misrepresent your driving record or other material
facts when applying for your insurance or while making a claim;
• If there exists a matter or issue related to the risk that constitutes a threat
to public safety;
• If there is a change in the condition of the risk that results in an increase in
the hazard insured against;
• If you fail to pay your premium when due; or
• If the driver’s license or motor vehicle registration of the named insured
or any covered driver under the policy is suspended or revoked for reasons
related to the driving record of the named insured or any covered driver.
Can my insurer nonrenew my policy if I gave inaccurate information when I
applied or when I made a claim?
Yes. Your insurer may lawfully nonrenew your policy if you commit fraud or
misrepresent material information when applying for insurance (such as, in
some cases, your driving record or accident history), or if you commit fraud or
misrepresent material information when ling a claim (such as, in some cases, how
the accident occurred or who was driving).
Additionally, by law, all applications for insurance and all claim forms must contain
the following statement, or a substantially similar one:
Any person who knowingly or willfully presents a false or fraudulent claim
for payment of a loss or benet or who knowingly or willfully presents false
information in an application for insurance is guilty of a crime and may be
subject to nes and connement in prison.
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Can my insurer cancel my binder if I gave inaccurate information when I
applied for insurance?
Yes. A binder is temporary evidence of insurance provided by the insurer or
insurance producer until a policy is actually issued. Under Maryland law, insurers
may use a 45-day underwriting period and if they nd you are not eligible within
that period of time, your policy may be cancelled with a fteen day notice to you.
e insurer must be able to prove that it mailed the notice to the named insured’s
last known address at least 15 days in advance of the cancellation; however, proof
that you actually received the notice is not required. You should answer all the
questions on the insurance application completely and honestly. An insurer may
cancel your coverage or raise your premium if you are dishonest.
Additionally, state law requires that all applications for insurance and all claim
forms contain the following statement, or a substantially similar one:
Any person who knowingly or willfully presents a false or fraudulent claim
for payment of a loss or benet or who knowingly or willfully presents false
information in an application for insurance is guilty of a crime and may be
subject to nes and connement in prison.
I wrote a check to purchase automobile insurance, and the insurer gave me a
“binder”. But then my check bounced and the insurer told me I did not have
insurance. Can the insurer do that?
Yes. If your initial premium payment is not honored by your bank and the insurer
informed you at the time of application that you would not have coverage unless
the initial payment was honored by your bank, then you will not have insurance
coverage. e insurer must notify you immediately, or the next business day after it
receives notice from your bank that your payment was not honored and that your
insurance coverage is rescinded. But your insurer is required to continue or reinstate
the policy or binder without a lapse in coverage if you promptly notify the insurer
that the nancial institution made an error and provide supporting documentation,
or you pay the insurer the amount of the initial premium within ve business days
of the date on the notice from the insurer that the payment was not honored.
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Can my insurer cancel my policy for late payment?
Your insurer may cancel your insurance policy for nonpayment of a premium, even
if the payment is just one day late. e insurer must mail a notice that the policy
will be cancelled for nonpayment of premium 10 days in advance to the named
insured’s last known address, or, if the insured elected to receive notices from the
insurer electronically, to the electronic mail address where the insured has consented
to receive notices. Proof that you actually received notice is not required. Some
insurers have guidelines for late payment and may reinstate your policy when the
payment has been made after its due date, but this is not required under state law.
e best practice is to pay your premiums by the due date in order to avoid having
your policy cancelled.
My insurer cancelled or nonrenewed my auto insurance policy; however, I did
not receive prior noti cation. Is this legal?
Maryland law requires your insurer to give you at least 45 days’ notice prior to
canceling or nonrenewing your auto insurance policy for any reason(s) other than
nonpayment of premium (the law requires only 10 days’ notice of cancellation for
nonpayment of premium). Your insurer must be able to prove that it mailed the
notice to the named insured’s last known address 45 days in advance of the date of
the policy’s cancellation or nonrenewal, or, if the insured elected to receive notices
electronically from the insurer, the insurer must be able to prove that it provided
electronic noti cation at least 45 days in advance to the electronic mail address
where the insured has consented to receive noti cations from the insurer. Proof that
you received the notice is not required.
Will I receive a notice after my policy has been cancelled or nonrenewed?
No. While some insurers may notify you as a courtesy,
insurers are not required to send additional notice
once the coverage has expired. e insurer is only
required to send a notice at least 45 days prior to
taking this action.
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A CONSUMER GUIDE TO AUTO INSURANCE
CLAIMS RELATED QUESTIONS
What should I do after an accident or when I discover I have to le a claim for
something other than an accident (i.e. vandalism or theft)?
You should:
• Dial 911. Give the operator detailed information about the incident,
including if you or others involved need medical assistance or towing
assistance.
• If possible, take pictures or draw a diagram of the scene. If your camera has
a date and time stamp, that would be useful.
• Remove your vehicle from the roadway and o to the side, if possible, so as
not to block the ow of trac.
• Talk to witnesses. Obtain names, addresses and phone numbers of those
who witnessed the incident/accident.
• Cooperate with the police. Provide all information that is requested
of you. Be sure to write down your incident/accident number and the
ocer’s name and badge number. (Note: In some counties and Baltimore
City, police may not write reports of accidents that do not involve bodily
injuries or excessive damage.)
• Take notes. Write down the location and time of the accident/incident and
any other details (e.g. summary of what happened). Exchange information
with others involved in the accident; including the names, addresses and
telephone numbers of the drivers and passengers; the names, addresses and
telephone number of any witnesses; as well as any insurance information
for any of the other vehicles involved (the name of the insurance producer,
insurer and the insurance policy number). Write down the make, model
and license plate of the other vehicles involved.
• Contact your insurer or insurance producer as soon as possible. Promptly
report any accident and provide all information that is requested. Keep
records of all paperwork related to your claim (e.g. copy of accident report,
notes from accident scene, expenses, etc.)
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Do I have the right to choose whether to repair, replace or receive payment for
my damaged vehicle?
An insurer is not obligated to replace your damaged vehicle with another vehicle.
If the vehicle can be repaired, and the cost of repair does not render the vehicle a
total loss, the insurer is required to pay for repairs up to the coverage limits less
any applicable deductible. If your vehicle is damaged but can be repaired, you may
elect to repair your vehicle or receive payment from the insurer for the damages.
However, if you do not repair the damage, these damages will become pre-existing
and will aect the value of your vehicle in the event of another loss. If there is a
lienholder on the vehicle, the lienholder may require that you repair the damage in
order to protect its security for the loan, or the lienholder may require that you pay
o the balance of the loan if you wish to keep any portion of the money you receive
from the insurer instead of using it to repair the vehicle.
If the damage to the vehicle cannot be repaired or if the cost of repairs exceeds the
insurer’s total loss threshold, the insurer will declare your vehicle a “total loss” and
pay the fair market value of the vehicle before it was damaged. You have the right
to elect to retain salvage of the damaged vehicle. is means that you receive a
payment and get a salvage title to your damaged vehicle. Please be aware that most
insurers sell totaled vehicles for salvage in order to recover some of the monies they
pay out. erefore, the salvage value will be deducted from the amount you receive
from the insurer in payment of the total loss if you decide you want to keep the
damaged vehicle. So, before you decide whether you want to keep the damaged
vehicle, you should ask the insurer what the salvage value is and the amount of
money you will receive if the vehicle is salvaged by the insurer as opposed to the
amount of money you will receive if you keep the damaged vehicle. Additionally, if
you keep the salvaged vehicle, please be aware that in the event of a subsequent loss,
the vehicle may have little or no value.
You should review your policy with respect to your rights and the insurer’s
obligations after a loss.
Am I required to use a specic auto body shop for the repairs to my vehicle or
can I choose the shop I want to use?
You are not required to use a specic auto body repair shop; you may have your
vehicle repaired at the shop of your choice. Maryland law prohibits an insurer or an
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adjuster from requiring that a certain repair shop be used or from recommending
a particular shop without notifying the claimant or the insured that their vehicle
may be repaired by the auto shop of their choice. e insurer will only pay an
amount that it has determined represents the cost of repair for the damage your
vehicle sustained as a direct result of the loss based on an estimate of the cost for the
necessary parts and labor expenses.
May my insurer repair my vehicle with used parts?
An insurer is not required to pay to have your vehicle repaired with original
equipment manufacturer (OEM) parts unless the policy provides this coverage.
Most policies only pay for repairs with parts of like kind and quality. Parts of like
kind and quality can include after-market and used parts. However, if your policy
only provides coverage for after-market or used parts and you want to use OEM
parts, you can use them if you pay the dierence in the cost of repair. You can check
with your insurer to see if they oer payment for repair of your automobile with
original equipment manufacturer parts. You also should review the language of your
policy to determine the insurer’s obligation.
What if my insurer determines that my car is a “total loss”?
An insurer may determine that your car is a “total loss” if the cost to repair the
damage (excluding cosmetic damage) equals or exceeds the vehicle’s actual cash
value. An insurer will determine what your vehicle’s actual cash value was by
establishing its actual cash value immediately before the damage occurred.
If you are the insured under the policy and your insurer has determined that your
vehicle is a total loss as a result of a covered claim, your insurer generally has 10
business days to make you a cash settlement oer. If your vehicle was stolen and is
not recovered, your insurer is required by law to make you a cash settlement oer
for your vehicle within the later of 30 days after receiving notication of the claim
or the time period provided in the policy.
If you are not the insured, but are a claimant under another’s insurance policy and
the other driver has been determined to be at fault, the insurer for the other driver
generally has 10 days to make you a cash settlement oer for your vehicle after it
has completed its investigation, determined its insured was at fault for the accident,
and determined that your vehicle is a total loss.
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A CONSUMER GUIDE TO AUTO INSURANCE
e oer from the insurer must be in an amount that reects the retail value for a
“substantially similar motor vehicle” using a nationally recognized valuation manual
or computerized data bank that produces statistically valid fair market values for a
substantially similar motor vehicle. A “substantially similar motor vehicle” means a
vehicle that:
1. is the same make and model as the damaged vehicle;
2. is the same year as, or more recent year than, the damaged motor vehicle;
3. contains at least the same major options as the damaged motor vehicle;
4. is in a condition substantially similar to or better than the condition of the
damaged motor vehicle immediately before the damage occurred; and
5. has mileage that is within the greater of 4,000 miles or 10 percent of the
mileage on the damaged motor vehicle at the time that the damage occurred
unless the vehicle is limited in production, specialty in nature, or older than
10 model years at the time of total loss.
Generally, insurers refer to the National Auto Dealers Association (NADA) Ocial
Used Car Guide, Kelley Blue Book or a vendor database like CCC to determine
your vehicle’s fair market value. e oer will be based on that value plus the
applicable taxes and transfer fees, less the amount of your deductible, if applicable.
Alternatively, the insurer may determine the fair market value of your vehicle by
obtaining a quote for a substantially similar vehicle from a qualied dealer at a
location reasonably convenient to you. If the insurer uses the quotation to make
its oer, it will add the applicable taxes and transfer fees and then subtract the
deductible, if applicable.
If a vehicle is damaged by collision, re, ood, accident, trespass, or other
occurrence to the extent that the cost to repair (excluding cosmetic damage) the
vehicle for legal operation on a highway exceeds 75% of the fair market value of
the vehicle prior to sustaining damage, by law, the vehicle is considered “salvage.” If
you decide to keep the damaged vehicle for salvage, there will be a deduction in the
settlement oer for the amount of the vehicle’s salvage value.
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A CONSUMER GUIDE TO AUTO INSURANCE
You may request that the insurer put in writing: (1) its settlement oer; (2) an
explanation of the method used to arrive at the oer; (3) a detailed explanation
of the calculation of the motor vehicle’s total loss value, including the calculation
of any value added to the motor vehicle by options; (4) a list of all the deductions
that will be made from the value of the motor vehicle; and (5) a copy of the
inspection guidelines relied on to determine the condition of the vehicle at the
time of the loss. An insurer is required by law to respond within 7 business days of
your request. Upon receipt of the insurer’s written settlement oer, you may either
accept or, in writing, reject the oer and make a counteroer based on quotes you
have gotten from dealers for a substantially similar motor vehicle, ads you have
found for a substantially similar motor vehicle, or any other source of valuation
for a substantially similar motor vehicle. If you make a counteroer, the insurer
has 5 business days within which to accept your counteroer or to provide you
with a written explanation as to why the information relied on in making your
counteroer does not provide a more accurate valuation of the vehicle than the
information relied upon by the insurer in making its oer.
Once you accept a settlement oer, the insurer may ask you to sign a limited power
of attorney and send it a copy of the vehicle’s title. After the insurer receives the
title, it will issue a check in the amount of the oer. If there is a lienholder on the
vehicle, the lien will either be paid directly, or a joint check will be issued to you
and the lienholder. If you choose to retain a damaged vehicle that has been declared
“salvage,” the insurer will request that you send your original title before it will send
you a settlement check. e insurer is also obligated to notify the MVA that the
vehicle has been declared salvage and that the owner is retaining possession of the
vehicle. e MVA will then issue a salvage certicate to the owner.
What if I disagree with my insurer’s decision to total my vehicle?
It is important to remember that when you purchase insurance, you enter into a
contract and are bound by its terms. However, as described above under “What if
my insurer determines that my car is a ‘total loss’?”, you have options available if
you do not agree with the decision to declare your vehicle a total loss.
If all attempts to resolve the issue of whether your vehicle is a total loss are
unsuccessful, many policies provide the option of appraisal. You should check
your policy to see if this is an option and if there are any requirements. Generally
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A CONSUMER GUIDE TO AUTO INSURANCE
though, you may hire an independent appraiser to evaluate your loss, and your
independent appraiser, along with the insurer’s designee, would then select a
person to referee the dispute (an umpire). Agreement by any two establishes the
amount of the loss. You may locate an independent appraiser by looking in your
local telephone directory or searching the internet. Because you must pay the
independent appraiser’s fee, this last option may be more costly.
What is subrogation?
According to the American Institute of Chartered Property Casualty Underwriters
(AICPCU), “Subrogation is the process through which an insurer assumes the right
to pursue a legal action against a party who may be liable to the policyholder.” To
better understand what this means and how this works, here’s an example: You were
involved in an accident with the At-Fault Driver and your vehicle was totaled. You
have collision coverage on your insurance policy covering the vehicle, and opted
to allow your insurer to pay you for the actual cash value of the vehicle less your
deductible. Since you were not at fault, your insurer will pursue the At-Fault Driver
and his/her insurer to recover the amount it paid out on your behalf, as well as your
deductible.
What happens if the at-fault driver’s insurer refuses to honor the subrogation
request?
Under Maryland law, all insurers that issue, sell or deliver motor vehicle liability or
physical damage insurance policies in the state are required to enter into arbitration
and settle all motor vehicle physical damage claims in accordance with an auto
subrogation program sponsored by an arbitration organization chosen by the insurer
requesting the arbitration. When the insurers proceed to arbitration, each insurer
presents its claim le to the arbitrator, who after review, issues a determination. e
determination may indicate that the insurer’s policyholder was responsible for the
accident or that the insurer failed to meet its burden of proof with regard to fault.
e arbitration decision is binding on the insurers and only for the property damage
aspect of the claim.
What is diminished value (diminution of value) and can I make a claim for it?
Diminished value or diminution of value occurs when a vehicle loses value after it
has been damaged in an accident and is subsequently repaired. An automobile may
suer from diminution in value even if the repairs have been done properly.
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Whether you can present a claim for diminution in value depends on who is at fault
for the damage to your vehicle. Since diminished value is not covered under your
own insurance policy, you cannot le a claim for diminished value, if you are at
fault. However, if someone else is at fault, diminished value is a valid component of
your liability claim against the at-fault party in an accident.
If you were not at fault for the accident and the at-fault driver’s insurer has accepted
liability, you can present a claim for diminution in value after all the repairs have
been completed. In this scenario, you can make a claim because the claim is being
paid pursuant to the liability section of the at-fault driver’s insurance policy (rather
than under your own collision coverage), and the insurer must pay all sums for
which its insured is legally liable. Maryland case law recognizes diminution in value
as a valid claim under these circumstances.
Simply advising the insurer that you want to claim diminished value is not enough.
Rather, the claimant must be able to provide proof of diminished value. A claimant
can provide proof of diminished value in a number of ways. Two common ways
are to:
1. obtain a written estimate from a sales manager at an automobile dealership
that indicates what would be oered for the vehicle if it had not been in an
accident, and what would be oered now after the accident and repairs. e
dierence, if any, would represent the diminished value; or
2. hire an independent appraiser to conduct an appraisal of the vehicle to
determine the amount of diminished value.
Once you have gathered your proof, this information should be presented to
the insurer in support of your claim for diminished value. e insurer can either
accept your evidence and pay you, or reject it in favor of its own evaluation of the
diminished value. Keep in mind that these evaluations are somewhat subjective,
so there can be negotiation over the settlement amount if the amount of your
diminished value claim demand diers from that of the insurer.
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A CONSUMER GUIDE TO AUTO INSURANCE
HOW TO FILE
A COMPLAINT
e Maryland Insurance Administration’s primary role is to protect consumers from
illegal insurance practices by making certain that insurers and insurance producers
doing business in Maryland act in accordance with state insurance laws. You may
contact the Insurance Administration to le a complaint against an insurer or
insurance producer who you believe is not acting in accordance with Maryland law.
Maryland’s insurance laws not only govern insurers’ conduct -- they also protect
Maryland consumers. Insurers are prohibited from settling claims in an arbitrary
and capricious manner. is means that insurers’ claim settlement practices must be
fair, nondiscriminatory and adhere to Maryland insurance laws.
If you feel that your insurer has acted improperly, you have the right to take action
by ling a complaint with the Maryland Insurance Administration. However, some
disputes may be governed by your policy’s terms and may not be a problem the
Maryland Insurance Administration can resolve for you.
Complaints must be received in writing. Please provide as much detail as possible,
including copies of pertinent documents. A trained, professional investigator will
handle your complaint. e investigator will contact the insurer/insurance producer
to try to resolve the issue. Meanwhile you will be advised of the steps being taken
on your behalf. Complaint les are not closed until the Maryland Insurance
Administration has made a determination regarding the complaint.
e MIA also established a Rapid Response Program designed to help certain
consumers resolve property and casualty claims (such as auto and homeowners
claims including those made under commercial lines policies) quickly and without
having to le a formal written complaint. For more information about this
program, please contact us at 410-468-2340 or 800-492-6116 ext. 2340.
Participation in the Rapid Response Program is voluntary and does not aect your
right to le a formal complaint.
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For additional information or if you have a complaint, please contact the
Maryland Insurance Administration’s Property & Casualty Complaint Division at
410- 468-2340 or toll-free at 800-492-6116 ext. 2340. Consumers may also fi le
their written complaint in person or by mail.
The preferred method for a consumer to file a complaint is by going online to the
Maryland Insurance Administration’s web site at www.insurance.maryland.gov and
under Consumers, click on File a Complaint.
Note: is publication was produced to help
consumers better understand auto insurance. is
publication, however, should not be considered a
substitute for you reading and familiarizing yourself
with your auto insurance policy.
Auto insurance policies are contracts with many
di erent parts and terms. As each consumer’s needs
are di erent and few auto insurance policies are alike,
many consumers bene t from the advice of a knowledgeable insurance producer.
Other consumers, however, are comfortable dealing directly with an insurer’s
customer service representative, who can answer questions and provide advice.
FILING A CIVIL ACTION FOR A FIRST PARTY
PROPERTY & CASUALTY CLAIM OR AN INDIVIDUAL
DISABILITY CLAIM
A Maryland consumer who has a property and casualty insurance policy (property
and casualty insurance includes automobile, homeowners, re and/or dwelling,
inland marine, commercial liability policies) or an individual disability policy (a
policy that provides for lost income, revenue, or proceeds in the event that an
illness, accident, or injury results in a disability that impairs an insured’s ability
to work or otherwise generate income, revenue, or proceeds that the insurance is
intendeds to replace) that was issued, sold or delivered in Maryland and believes
that his/her property and casualty insurer or his/her individual disability insurer
failed to act in good faith in making a decision regarding his/her rst-party
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insurance claim may seek special damages against the insurer by ling a civil
complaint, in addition to or in place of ling an administrative consumer complaint
with the Maryland Insurance Administration (MIA).
e Insurance Article denes good faith as making a judgment based on honesty
and diligence supported by evidence the insurer knew or should have known at
the time the insurer made a decision on the claim. If the Maryland consumer
les a civil complaint and the insurer is found to have failed to act in good faith,
the insured may be entitled to an award with enhanced damages. Such enhanced
damages may include, in addition to the actual contract damages, litigation
expenses, including reasonable attorneys’ fees not to exceed one third of the actual
damages payable to the insured, and interest at the post-judgment rate.
An explanation of when a consumer can seek these special damages, when a
lawsuit has to be led with the MIA, and how to make that ling are explained
in a separate MIA publication: “A Guide for Consumers Filing a 27-1001 Civil
Complaint.”
MIA-A-1 (7/24)
is consumer guide should be used for educational purposes only. It is not
intended to provide legal advice or opinions regarding coverage under a specic
policy or contract; nor should it be construed as an endorsement of any
product, service, person, or organization mentioned in this guide. Please note
that policy terms vary based on the particular insurer and you should contact
your insurer or insurance producer (agent or broker) for more information.
is publication has been produced by the Maryland Insurance Administration
(MIA) to provide consumers with general information about insurance-related
issues and/or state programs and services. is publication may contain
copyrighted material which was used with permission of the copyright owner.
Publication herein does not authorize any use or appropriation of such
copyrighted material without consent of the owner.
All publications issued by the MIA are available free of charge on the MIA’s
website or by request. e publication may be reproduced in its entirety
without further permission of the MIA provided the text and format are not
altered or amended in any way, and no fee is assessed for the publication
or duplication thereof. e MIA’s name and contact information must
remain clearly visible, and no other name, including that of the insurer or
insurance producer reproducing the publication, may appear anywhere in the
reproduction. Partial reproductions are not permitted without the prior written
consent of the MIA.
People with disabilities may request this document in an
alternative format. Requests should be submitted in writing to
the Chief, Communications and Public Engagement at the
address listed below.
200 St. Paul Place, Suite 2700
Baltimore, MD 21202
410-468-2000
800-492-6116
800-735-2258 TTY
www.insurance.maryland.gov
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INSURANCE ADMINISTRATION
